Market developments
Equities:
Investors remain optimistic as U.S. data supports the “Goldilocks” scenario of a balanced economy with key inflation indicators easing while positive economic outlook fuels speculation that the economy can avoid a recession. Tech firms’ earnings continued to signal optimism for a soft landing, with AI remaining a focal point. The market has seen a strong rally amid decreasing inflation, steady economy, and better-thanexpected Q2 earnings reports in the U.S., the S&P 500 and Nasdaq gaining 1% and 2% respectively.
Fixed income:
The Fed remains cautious about ruling out additional rate hikes, with strong data suggesting a prolonged tightening cycle. However, indicators currently point towards a relatively soft landing, and as long as the labour market remains tight and inflation stays above the 2% target, further rate increases are expected in the coming months. Investors appear reassured that tighter monetary policy has not yet pushed the economy towards a recession. U.S. 10yr yields ended the week up 12bps to 3.95%, while the Canadian 10yr rate closed at 3.51%, up 10bps on the week.
Commodities:
Oil’s weekly gains reached a one-year high, driven by tightening global supplies and expectations of the Federal Reserve’s eventual easing of tightening measures. OPEC+ actions, China’s stimulus, and improving global demand supported the rally, pushing the price $80 per barrel. However, traders anticipate potential corrections due to overbought conditions and volatility.